Government to reject interest rate caps
25th August 2004

Debt on our Doorstep has learned that the Government intends to issue a statement this week rejecting interest rate caps as a means of curbing extortionate lending in the U.K. If true, then the decision represents a failure of the Government to protect the interests of low income consumers in the face of pressure from big business interests.

The rejection of caps is also based on a completely inadequate investigation of the issue, as previously indicated bu Debt on our Doorstep in our submission to the Department of Trade & Industry concerning the 'research' undertaken by Policis (see previous news stories). In fact, our letter, sent to DTI officials in June, which raised concerns about the quality of the research and which asked for an independent opinion to be sought, still remains unanswered.

Importantly, Debt on our Doorstep sent in detailed evidence of how a cap could be constructed based on Provident Financial's home collection loans. Even after accepting Provident's costs for home collection, and for lending to riskier customers, our paper indicated that a cap could be brought in at half of the level currently charged. An 84% APR cap may sound high - and it is - but it would still mean savings worth over £370 million for cborrowers in the home credit industry. Signficantly, the DTI research has not looked at the operation of any caps above 36%.

A copy of our paper concerning caps in the Home Credit industry can be downloaded here